NZ dollar little changed this week amid US political brinkmanship

By Paul McBeth

Oct. 11 (BusinessDesk) - The New Zealand dollar was little changed this week as US policymakers continued to bicker over the Federal budget and looming breach of the debt ceiling, leaving financial markets nervous about taking positions.

The kiwi dollar traded at 83.04 US cents at 5pm in Wellington from 83.14 cents at the start of the week. It traded at 82.88 cents at 8am today and 82.58 cents yesterday. The trade-weighted index rose to 77.15 from 76.79 yesterday and 76.87 at the open on Monday.

A BusinessDesk survey of 10 traders and strategists predicted the currency would trade between 81.50 US cents and 84.50 cents this week. Six expected the currency to be largely unchanged with only a slight bias either way, while two predicted it to decline and two picked a gain.

The political impasse in the US House of Representatives has left markets nervous.

Failure to cut a deal on the Federal budget has left American government services shut down and threatens to prevent the nation’s debt limit being lifted next week, potentially triggering unprecedented loan repayment defaults by the world’s largest economy.

Lawmakers are continuing their discussions on a proposal to push out the debt debate in an attempt to stave off the world’s biggest economy from defaulting on its debt obligations.

“A default would be a major risk aversion event, like Lehman Brothers – there’s no way they would let it get to that,” said Dan Bell, head of corporate sales at HiFX in Auckland. “The kiwi has been around 83 US cents in a pretty quiet range this week, though it looks like there’s more topside bias.”

The local currency gained to 81.77 yen at 5pm in Wellington from 80.67 yen yesterday on growing optimism a deal will be cut.

Once the politicians can settle on a deal, HiFX’s Bell expects markets will resume their focus on US monetary policy, with the Federal Reserve expected to start withdrawing stimulus this year as the American economic recovery continues. Deputy chair Janet Yellen this week was nominated by President Barack Obama to replace outgoing chair Ben Bernanke next year.

New Zealand food prices were unchanged last month as cheaper vegetables offset gains in grocery items. That’s ahead of next week’s third-quarter consumers price index, which is expected to show quarterly inflation of about 0.9 percent.

The kiwi dollar slipped to 87.65 Australian cents at 5pm in Wellington from 87.74 cents yesterday ahead of a Chinese trade report tomorrow. Australia is a bigger benefactor of Chinese trade through its mining exports than New Zealand is through agriculture.

The local currency gained to 61.32 euro cents from 61.15 cents yesterday, and increased to 51.95 British pence from 51.83 pence yesterday.

(BusinessDesk)

© Scoop Media

BusinessDesk

Independent, Trustworthy New Zealand Business News

The Wellington-based BusinessDesk team of former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

CONTACT BUSINESSDESK

• Email - jonathan@businessdesk.co.nz

• Email - pattrick@businessdesk.co.nz